XYZ Company Has an Inventory Turnover of 20 Times Per

question 44

Multiple Choice

XYZ Company has an inventory turnover of 20 times per year.The industry average is 5.0 times per year.What does a high inventory turnover mean?

• A)The company has too much inventory on hand.
• B)The company may have obsolete inventory on hand.
• C)The company may not be keeping enough inventory on hand which can lead to lost sales.
• D)The company is having a difficult time selling the inventory.

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Definitions:

Fair Value Through Profit or Loss

A financial accounting method where changes in fair value of an asset or liability are reflected in the profit or loss as they occur.

Balance Sheet

A financial statement that shows a company’s assets, liabilities, and shareholders' equity at a specific point in time, providing a basis for computing rates of return and evaluating its capital structure.

Significant Influence

The power to participate in the financial and operating policy decisions of another entity, often reflected by ownership of 20% to 50% of the voting stock.

Fair Value Through Profit or Loss

A classification for financial instruments that are measured at fair value with changes recognized in profit or loss.